1. Fully explain why there is neither upward nor downward pressure on the inflation rate when the economy is at full employment.

2. Use the Solow model to show graphically and explain how a rise in capital-augmenting technology affects an economy's output per worker and long-run growth rate.

3. What happens to the impact of government spending on increasing output when households increase their savings rates? Provide a complete explanation.

4. What is the importance of the velocity of money in establishing the relationship between increases in the money supply and changes in the inflation rate?

5. Assume that the Fed engages in an expansion of the money supply that drives the economy above full employment. Show graphically and explain how this economy adjusts back to full employment in the long run.